Good Management of Medicare Advantage is Not a “Cut” to Medicare

Although politicians often speak of wanting to target “waste, fraud, and abuse” in government programs, there is currently an effort to prevent the Centers for Medicare and Medicaid Services (CMS) from doing just that. Specifically, some Members of Congress and interest groups want to go beyond the misguided bipartisan effort to take Social Security and Medicare changes “off the table," and actually prevent CMS from following the law and making updates to reduce waste in the Medicare Advantage (MA) program.

Medicare Advantage is a program that allows Medicare beneficiaries to select a privately-run insurance plan in place of traditional Medicare. Although these plans can sometimes be more efficient than traditional Medicare, they cost the federal government significantly more per beneficiary. As we have written before, MA plans use continually increasing “coding intensity” to inflate the risk portfolio of their enrollees. This leads to large and growing overpayments from the government and substantial profit margins for the MA plans.

While we and others have called for CMS to work aggressively to prevent these wasteful and often fraudulent overpayments, the modest tools and guardrails CMS has recently proposed to utilize are being dangerously demagogued. CMS’s normal annual rate setting – which is based on changes in traditional fee-for-service Medicare, demographics, and beneficiary health care costs – is being falsely labeled a “cut” to Medicare benefits.

Specifically, CMS recently proposed to pay insurance companies what they estimate will add up to a 1 percent increase in 2024 (CMS still has some calculations to do before the payment amount is finalized), on top of the massive 8.5 percent increase for 2023 and 4 percent increase in 2022.

CMS also recently released a rule that creates a procedure for “Risk Adjustment Data Validation (RADV)” audits. The rule sets up a system for auditing MA plans to address faulty risk adjustment from improper data and coding submissions. CMS estimates that beginning with the year 2018, it could recoup an estimated $4.7 billion in overpayments over the following decade – which is a small fraction of the total overpayments estimated by MedPAC and our own Health Savers Initiative. CMS decided to forgo recouping overpayments uncovered by prior audits going back to 2011.

There is universal agreement among health policy experts that the waste, fraud, and abuse in Medicare Advantage being targeted by the audits is widespread and has huge costs for the Medicare trust fund and the federal budget. And although CMS has the authority to impose across-the-board adjustments to address overpayments, they have chosen to act in smaller and more targeted ways.

The tactics used against modest attempts to maintain the integrity of the Medicare programs, unfortunately, mirror similar misleading claims against payment reforms proposed by the Trump Administration and drug savings from the Inflation Reduction Act. All have been criticized as cuts to Medicare benefits, despite the fact they would lower costs for beneficiaries.

With the Medicare trust fund projected to be insolvent within a decade, and the significant role of health care costs in driving large long-term deficits, reforming Medicare and Medicare Advantage must be part of the conversation to reduce excessive spending and policymakers should not allow misleading statements to derail progress.